Len­ders’ re­liance on ECB fund­ing in­creases

Greek banks’ re­liance on Euro­pean Cen­tral Bank fi­nanc­ing in­creased for the first time in five months in May, the coun­try’s cen­tral bank said yes­ter­day.

Greek banks’ re­liance on ECB liq­uid­ity rose to 97.5 bil­lion eu­ros in May from 86.8 bil­lion in the pre­vi­ous month, ac­cord­ing to a Bank of Greece state­ment.

Greek banks have been hurt by con­cerns over their hold­ings of gov­ern­ment bonds and spec­u­la­tion the coun­try may have to re­struc­ture its debt. Greece is the low­est-rated coun­try in the world by Stan­dard & Poor’s even af­ter re­ceiv­ing a 110bil­lion-euro bailout from the Euro­pean Union and In­ter­na­tional Mon­e­tary Fund.

Mean­while, Europe’s top bank­ing watch­dog has warned banks to be more re­al­is­tic about the value of Greek bond hold­ings, rais­ing the pos­si­bil­ity that an in­dus­try-wide health check will force them to raise more cap­i­tal. With only weeks to go be­fore the re­sults of the so-called stress tests, the Euro­pean Bank­ing Au­thor­ity (EBA) said yes­ter­day it was closely mon­i­tor­ing the de­te­ri­o­rat­ing sit­u­a­tion in Greece and had given banks ad­di­tional guid­ance “to ad­dress in­con­sis­ten­cies and ex­ces­sive op­ti­mism” on sov­er­eign ex­po­sures.

The reg­u­la­tor is putting 91 banks un­der the spot­light to see if they are strong enough to with­stand a twoyear re­ces­sion. The re­sults are ex- pected to be re­vealed on July 13.

Greece’s deep­en­ing cri­sis has reignited concern that banks are not tak­ing a big enough ”hair­cut,” or loss, on their Greek and other pe­riph­eral eu­ro­zone gov­ern­ment bonds.

The pa­ram­e­ters for hair­cuts to banks’ trad­ing book as­sets had been ad­justed to re­flect cur­rent mar­ket val­ues for sov­er­eign risk and banks’ cost of fund­ing, the EBA said in a state­ment.